ABSTRACT: Many judges, lawyers, and academics worry that the federal courts are
in serious trouble, plagued by high litigation costs, huge delays and
case backlogs, and unacceptable risks of frivolous litigation. These
complaints are not new; they began in a strong way about three decades
ago and have remained intense ever since. Whether the situation is as
serious as the critics claim—and there are certainly those who believe
the concerns are overblown—the widely shared perception that there are
problems has led to major changes in federal civil procedure over the
past three decades.

The Supreme Court’s recent decision in Bell Atlantic Corp. v. Twombly is one of the most controversial developments along these lines. Twombly
was a nationwide antitrust class action brought under Section 1 of the
Sherman Act alleging an anti-competitive conspiracy among the four
largest telecommunications companies in the United States. The Court
held that the plaintiffs failed to allege sufficient facts to support a
plausible inference of agreement and that as a result the district
judge properly dismissed the complaint. On a more general level, the
decision increases the pleading burden and in so doing makes it more
difficult for plaintiffs to gain access to federal courts.

I have written about Twombly
in a published article, and this short commentary draws on the analysis
I develop there. I will first briefly explain the decision’s impact and
then sketch the outlines of a policy critique.

III STACKELBERG LECTURE by:

One of the most controversial questions in
current competition policy is when, if ever, should competition
law require a firm with market power to share its property,
notably intellectual property, with its rivals? And if supply is
required, on what terms? These questions are discussed by one of
the leading experts with reference to recent law cases including
the EC Microsoft judgment of 2007 and the US LinkLine case of
2009. John Vicker's analysis focuses on whether competition law
and regulation are complements or substitutes, and on incentives
for investment and (sequential) innovation.

Topics will
include: Advances in the Theory of Innovation and IPR Policy; Antitrust
Policy for Markets in the New Economy; Innovation and
Schumpeterian Growth; Advances in Empirical Industrial
Organization for ICT Sectors; Competition Policy for the New
Economy; Advances in the Theory of Oligopoly; Online
Advertising; Cloud computing.

The Gala Dinner will take place for all the partecipants at
Restaurant
Bagutta on September 15th.

We will provide
free
accommodation for all the conference participants at the
Hotel Galles.

ABSTRACT: This paper investigates the effects of competition on hospital quality. It
proposes to extend the Elzinga-Hogarty quantity flow approach of defining
markets by first determining the trading cluster to which each hospital belongs
and then delineating markets using patient flow information. After defining
hospital markets and computing measures of competition, this paper examines the
effect of competition on hospital quality using hospital administration data
from the state of Victoria, Australia. We approximate quality using two
indicators, namely mortality within 30 days of discharge and unplanned
readmission within 28 days of discharge. For each quality indicator, a random
intercept logit model is estimated. Two main findings are reported. First, the
boundaries of markets and hence the degree of competition depend on the nature
of the medical services provided. Second, competition is found to have a mixed
effect on qual! ity of hospital care–increasing the number of private hospitals
appears to lower quality, while increasing the number of public hospitals has
the opposite effect. The intensity of competition, on the other hand, does not
appear to have a statistically significant effect on quality.

Bill Kovacic (FTC Commissioner) has written the new and interesting Assessing the Quality of Competition Policy: The Case of Horizontal Merger Enforcement. I read it yesterday and encourage everyone to do the same.

ABSTRACT: This article suggests how a jurisdiction might best go about evaluating the
quality of its competition policy system. It urges that competition agencies
and collateral institutions strive to improve the ability to measure the economic
effects of merger control and to verify the consequences of different
approaches to enforcement. The article uses merger control in the United
States as its main illustration, but the article’s observations apply to other areas
of competition policy oversight, as well. The article seeks to encourage the
recent trend within the global competition policy community of accepting a
norm that focuses greater attention on the evaluation of the economic effects
of enforcement decisions—especially by developing better quantitative measures
of actual economic effects—and the assessment of the processes by which
competition agencies examine individual transactions.

ABSTRACT: For the ACCC there are “forks in the road” in deciding how to deal with the
interaction between its highly acclaimed Immunity Policy for Cartel Conduct and
(1) the criminalisation of serious cartel conduct; (2) the rise in private
enforcement and damages claims in relation to cartel conduct; (3) the increased
significance of cartel case settlement or, in the criminal context, plea
negotiation; and (4) the potential strategy of offering alternative financial
rewards for cartel information. In relation to each of these, this article
(published in two parts) explores the issues involved; the ACCC’s current
proposals for dealing with them (to the extent any such proposals exist);
overseas models for tackling the issues; and the way forward in meeting the
challenges and/or harnessing the opportunities presented. Part 1 deals with
criminalisation and private enforcement. Part 2 of the article will deal with
settlements and alternative rewards.

ABSTRACT:
Economists sometimes decry the persistence with which firms set prices
above marginal cost and thus, according to the economists, fail to maximize
profits. But it is the economists who have it wrong – first, because
variable accounting costs are not always a good proxy for marginal economic
costs, but more importantly because in an industry with U-shaped cost
curves, a firm at a long-run sustainable equilibrium faces increasing
marginal costs – i.e., a rising shadow price on some
constrained input – i.e., in general, acost of capital.
A corollary is that in such an industry the equilibrium mark-up over
variable cost varies directly with capital intensity.

Currently
more than twenty statutory antitrust exemptions exist, scattered
throughout the U.S. Code, which touch upon widely differing aspects of
commerce. Now, for the first time, this monograph comprehensively
surveys the diverse array of statutes currently in force that modify or
limit federal antitrust law, and analyzes their costs and benefits.
Lawyers and economists familiar with some of these laws might be
surprised by the extent of some of them or the variety of the subjects
they affect.

Federal Statutory Exemptions from Antitrust Law presents an analysis of the statutory exemption practice and its effects on the economy and public welfare.

The history of predatory pricing law and economics is peculiar on account of
the seemingly inescapable contradiction between the legal habit of condemning a
business practice on account of its possible unfair and inefficient effects and
the necessity of providing an economic rationale for the condemnation without
undermining the essence of competition itself. The apparently rock-solid
equation “low price = good price” makes such a rationale neither immediate nor
easy to find – and predatory pricing such an interesting issue from the
viewpoint of historians of economics. How to circumvent the equation has been
the challenge for several of the most brilliant minds of postwar microeconomics,
as well as for outstanding law scholars. It is a fascinating story, with deep
implications for at least two major historiographic issues: first, the evolution
of neoclassical economics, as embodied in one of its most important branches,
industrial organization; second, the relationship between the formal results of
theoretical economics and their policy implications, in a particular their
applicability for courtroom litigation.

This is the first in a pair of
papers dedicated to this story. The division between the two works is strictly
chronological: the present paper covers the period from the 1950s to about 1980,
that is to say, until the verge of the game-theoretic revolution in industrial
organization; the other will focus on the period 1980–2000, covering the
above-mentioned revolution and its relationship with a couple of remarkable
Supreme Court’s decisions on predatory pricing. The main thesis of the two works
is that the traditional dichotomy between alternative legal standards, those
based on “stories” and those based on “rules”, may prove useful in interpreting
the evolution of economists’ thought about predatory pricing and, more
generally, in explaining under what conditions a theoretical statement may have
an effective policy impact, especially in courtrooms.

ABSTRACT: The application of antitrust law to State actors is a controversial issue in
competition laws worldwide. The resolution commented in this paper analyzes an
specific case regarding the sourcing of pharmaceuticals and other medical
products by health regional authorities in Castilla-La Mancha. In its resolution
the Spanish National Competition Commission (NCC) makes some relevant assertions
on the application of antitrust prohibitions to State actions.

Although
the principles inspiring the final decision by the NCC could broadly be shared,
the resolution makes some problematic contentions, particularly regarding EU
competition Law. Additionally, the resolution makes a mistaken description of
the factual background of the anticompetitive conducts investigated, blurring an
adequate understanding of the behaviour of the regional health service, the
council of the professional associations, the professional associations and the
pharmacies of Castilla-La Mancha, and that affects the final modest outcome
(condemnation without sanction).

Finally, the inappropriate construction
of the anticompetitive conducts contained in the resolution gives way to a
radical, but erroneous, dissenting opinion, expressing a view drastically
opposed to the majority resolution, questioning the application of antitrust
laws to regional health authorities in Castilla-La Mancha when they resort to
the market to source their medical products needs.

This Comment claims
an alternative construction of the anticompetitive conducts examined by the
resolution, providing different evaluation of the conducts of the regional
health service, the council of the professional associations, the professional
associations and the pharmacies of Castilla-La Mancha. Moreover, following the
wrong path taken by the resolution and the dissenting opinion, this Comment will
tackle the general antitrust law framework in which state powers’ actions and
decisions should be analyzed - specifically, when rendering social and health
related services - reviewing the recent European case law on this topic.

ABSTRACT: This article proposes that s 46 of the Trade Practices Act be amended so that
a firm 'takes advantage' of its market power not only where that power gives the
firm the ability to engage in anti-competitive conduct but also where it gives
the firm the motivation to do so. Amending the provision in this manner would
close a gap that currently exists in the regulation of unilateral
anti-competitive conduct that allows firms with market power to protect or
strengthen that power by engaging in conduct they would have the ability to
engage in even if they did not possess market power.

ABSTRACT: The regulatory oversight of the private Medicare Advantage (MA) program
makes the role of competition in this market unclear. This paper
empirically examines the impact of competition by measuring the effects
of changes in market structure on enrollment. The study examines
competition in local geographic markets using county-level enrollment
data from 2001-07. I find that an increase in the number of competitors
results in an increase in the number of enrollees served - consistent
with competition motivating firms to provide more generous benefits.
Competition also results in an increase in product proliferation, which
highlights a dimension of competition not previously examined. Overall,
the results are similar to what one might expect in an unregulated
environment, suggesting that there are benefits from competition that
are not realized by regulation alone.

One of my pet issues is competition in the postal sector. I have a forthcoming article in the BYU Law Review that looks at comparative corporate governance and competition policy of state owned enterprises. I use the postal sector as an example of the potential for bad corporate management and possible anti-competitive harm.

I should forward the current draft to the GAO, which released a report which points to the USPS as a financial high risk for the US. Not once does the report mention the word competition and not once does the GAO think to recommend an end to the postal monopoly as a way to have the market force the USPS to become more efficient. The USPS still operates under a soft budget constraint and no doubt would be bailed out no matter how many years of deficit it would face.

ABSTRACT: Without question, Bell Atlantic v. Twombly ranks as one of the
most controversial decisions of the United States Supreme Court in
recent years. Its importance stems from the simple reason that it lies
at the crossroads of antitrust and civil procedure, with vast potential
implications for both fields. As a matter of antitrust law it raised
the possibility that a large number of complex cases would be dismissed
prior to discovery. As a matter of civil procedure, the decision offers
the most systematic examination of the pleadings standards in federal
cases since the bellwether case of Conley v. Gibson, decided
one-half century earlier. Neither of these revolutions will come to
pass. On the substantive side, only cases for which there are strong
theoretical reasons to doubt the plaintiff’s case will be dismissed
under Twombly. On the procedural side, Twombly will
not be read to undo the usual rules of notice pleading except in rare
cases. It will amount to a subtle but useful recalibration of existing
doctrine. It will not become, nor should it become, a transformative
case.

To establish these claims, I shall proceed as follows. Part II examines compares the rule in Conley with the rule in Twombly in light of their very different factual patterns. Part III then looks at subsequent decisions under Twombly,
first in the Supreme Court, where there are no new antitrust cases, and
then in the lower federal courts, where the decision has been subject
to extensive discussion both in the general law and in the antitrust
area. These cases show an incremental movement in the law that will in
general follow the older practice of using the pleadings for notice
purposes, and discovery for fact finding purposes.

ABSTRACT:
For decades the fact that input price hikes are passed on faster than
input price cuts was thought to be well explained by the assumption
that competitive firms fully pass on all input price changes, so they
can't price asymmetrically, so asymmetric pricing behavior is limited
to oligopolies, firms that do all sorts of bizarre things (finding yet
another one being no big deal). However, Peltzman found no effect of
concentration on such asymmetric pricing, raising the puzzle of why
competitive industries generally price asymmetrically. This paper solves
that puzzle.

Another
in the ABA Section of Antitrust Law Monograph series, this book focuses
on public policy issues that arise from the antitrust treatment of
efforts to petition government or influence government toward
anticompetitive action, including petitioning efforts that are
themselves collective or anticompetitive. This book expands and updates
information that was presented originally in the Section's 1993
monograph on the same subject.

This
volume will be a valuable addition to the debate over how the antitrust
laws should be applied to collective and unilateral efforts to
influence government action for allegedly anticompetitive ends, as well
as a valuable resource in applying the Noerr-Pennington doctrine.

Chapter Listing

Chapter IThe Noerr-Pennington Doctrine Defined

Chapter IIThe Sources Of The Noerr-Pennington Doctrine

Chapter IIIThe Basis Of The Noerr-Pennington Doctrine: Statutory Construction Versus The First Amendment.

Chapter IVWhat Encompasses Petitioning?

Chapter VWhat Do We Mean By Government?

Chapter VIWhat Do We Mean By Generally Immune? TheExceptions To The Immunity

ABSTRACT: With recent changes in case law requiring district courts to make
deeper inquiries at the class certification stage, a systematic
treatment of the economics of class certification is particularly
relevant. This article offers an economic interpretation of the legal
concept of common impact as it is used in antitrust class certification
matters. It interprets the predominance requirement central to Rule
23(b)(3) as requiring that the only economically significant factors
are common factors. These economic factors may or may not be related to
the alleged conduct; thus, common impact should be investigated with
respect to factors related to the alleged conduct ("conduct factors")
as well as to other economic determinants ("non-conduct factors"). With
an economic framework established, this article proceeds to examine
empirical testing of common impact by describing three types of
empirical tests that are likely to be applicable in a wide variety of
antitrust class certification matters. Each type of test focuses on
differences in prices paid by putative class members.

ABSTRACT: We examine the implications of policies to improve information about
the qualities of profit seeking duopoly hospitals which face the same
regulated price and compete on quality. We show that if the hospital
costs of quality are similar then better information increases the
quality of both hospitals. However if the costs are sufficiently
different improved information will reduce the quality of both
hospitals.

ABSTRACT: Most popular approaches for modeling electricity prices rely at present
on microeconomics rationale. They aim to study the interaction between
decisions of agents in the market, and usually represent the impact of
uncertainty in such decisions in a simplified way. The usual
methodology of microeconomics models is the study of the interaction
between the profit-maximization problems faced by each of the firms. On
the other hand, there is a growing literature that describes the power
price dynamics from the financial standpoint, through the statement of
a more or less complex stochastic process. However, this theoretical
framework is based on the assumption of perfect competition, and
therefore the stochastic process may not capture important features of
price dynamics. In this paper, we suggest a mixed approach, in the
sense that the price is thought of as the composition of a long-term
component, where the strategic behavior is represented, and a
short-term source of uncertainty that agents cannot take into account
when deciding their strategies. The complex distributional implications
of the oligopolistic behavior of market players are then given by the
long-term-component dynamics, whereas the short-term component captures
the uncertainty related to the operation of power systems. In addition,
this modeling approach allows for a direct description of the long-term
volatility of power markets, which is usually hard to estimate through
statistical models.